Investigator Of Microsoft Unrelenting In His Pursuit

By STEVE LOHR

Published: August 9, 1999

The marquee stars of the Government's antitrust assault on the Microsoft Corporation have been David Boies, the trial lawyer who proved a master at catching Microsoft witnesses off-guard, and Joel I. Klein, the chief of the Justice Department's antitrust division.

Yet the outcome of the Government's case -- win or lose -- will largely hinge on whether the Federal courts are impressed by the work and judgment of Phillip R. Malone.

The 40-year-old senior staff lawyer in the Justice Department's San Francisco office led the agency's investigation of the software powerhouse.

It was Mr. Malone and his San Francisco team of ''hawks'' on the Microsoft issue, according to people involved in case, who strongly urged Washington to file a major antitrust suit against the company. After internal debate and review, Mr. Klein eventually agreed with the San Francisco recommendation and the Justice Department sued Microsoft in May 1998, joined by 20 states. Then, before the start of the trial in October, Mr. Malone managed the campaign to add new evidence to the case and criss-crossed the country taking dozens of new depositions. He also coordinated the Government's trial preparation, a painstaking effort that paid off repeatedly in the courtroom during the eight months of witness testimony.

''The case that has been presented is Phil Malone's case,'' Mr. Boies observed. ''Take Phil and his San Francisco staff, and this case could have progressed without anyone else -- and that includes me. It may not have been quite as dramatic in the courtroom, but the case would have been the same.''

The next step in the Microsoft case occurs tomorrow, when each side presents the court with its ''proposed findings of fact.'' These amount to legal storytelling, as each side presents its view of the facts established in the trial citing witness testimony, electronic mail or documents. And they will be tomes -- though still being edited at the end of last week, the Government draft was nearly 800 pages, and Microsoft's was about 250 pages.

The evidence cited will not be new. But these documents are efforts by both sides to organize and present the evidence to Judge Thomas Penfield Jackson, giving him a source book and a lens for viewing the case. The two sides, of course, will present very different views. And there is more to come, with both sides scheduled to submit revised findings of fact next month.

Mr. Malone, once again, is at the center of things. He and his San Francisco team found the facts the Government is presenting as evidence, while Microsoft is rebutting them as hearsay, irrelevant or inconseqential in an antitrust case. Even Microsoft concedes that its witnesses got roughed up and occasionally embarrassed by Mr. Boies during the trial. But with the focus now turning to a cool assessment of the testimony, evidence and law, Microsoft's legal team insists that the advantage is shifting to their side. In short, they much prefer opposing Mr. Malone's case on paper than opposing Mr. Boies in the courtroom.

''It was good theater in the courtroom, but the Government left vast portions of our direct testimony untouched,'' said William Neukom, Microsoft's general counsel. ''And this is our opportunity to tell our story based on the unchallenged facts in the case.''

The Microsoft story is that contrary to the Government's allegations, it has not illegally used the market muscle derived from its control of desktop personal computer software to stifle the challenge from Internet software. Consumers, Microsoft said, benefited from its decision to fold Internet browsing software into its industry-standard Windows operating system.

The Government's view was perhaps most cogently expressed by a senior Justice Department official in the hallway of the Federal court building in June. After a morning of testimony about Microsoft's reported arm-twisting tactics, the official told a colleague, ''If that stuff isn't illegal, we should shut down the Justice Department.''

Mr. Malone was largely responsible for making that the received wisdom within the Justice Department -- though, of course, the policy decisions are not made by the staff but by the top appointees in the antitrust division, Mr. Klein and A. Douglas Melamed, the second in command.

With the case still pending, Mr. Malone will not discuss the investigation in detail. But he did say that it was the accumulation of evidence -- and not any single episode or document -- that persuaded him that Microsoft had gone too far.

''It was the mountain of evidence. All those Microsoft E-mails keep coming back over and over again to the same theme,'' Mr. Malone said. ''Its own documents make it very clear that Microsoft knew what it was doing -- protecting its monopoly.''

Mr. Malone is regarded within the Justice Department as one of the top staff lawyers in the antitrust division. Colleagues describe him as soft-spoken, focused and driven, as one might expect of the son of a railway technician who grew up in Thoreau, N.M., a rail stop and logging town of 500 people at the time, and then made his way to Harvard University as an undergraduate, before getting his law degree at the University of Arizona and joining the Justice Department.